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Four Crucial Questions to Ask When Considering Telecom M&A

Many industries have gone back to pre-COVID days but not telecom or their supporting technology partners. In fact, the pandemic gave a modern-day meaning to the decades-old iconic long-distance campaign to “reach out and touch someone.” With so many months (and even years) of remote and isolated living, telecom audio and voice communications became the heroes of the era, bringing us together and forever changing our options in socializing and doing business. From corporate business meetings to healthcare appointments to family reunions to job interviews and theatrical auditions, and more—telecom connections took center stage and have continued to be a vital force across businesses, lifestyles, and the economy.

Ironically, in 2019, there had been a significant reduction in telecom M&A activity, but by 2020, deals grew close to 50%, reaching a total of $140 billion worldwide. By the time 2021 came to a close, global M&A in the sector booked over 8,000 deals with a value of $941 billion. Inflationary fears and economic downturns slowed global telecom M&A in the first half of 2022 to $603 billion.

With the technology sector continuing to be of tremendous value in today’s world, expansion through M&A could be the right direction for your growth strategy. Below are the four most important questions to ask when considering a telecom or technology company acquisition.

  • What will you gain? It may seem counterintuitive, but when there is one strong reason rather than many reasons, it is likely to have a better outcome. One singular purpose will clear a focused pathway to identify objectives and guide decision-making. Whether you are looking to expand your global footprint, enhance hardware systems, or acquire an entire carrier to expand your presence in a region, knowing why must come before knowing how. Historically, the most successful M&A deals have been driven by one overriding purpose. Multiple reasons spawn multiple potential outcomes, which often cause deals to spin out of control and fail.
  • Is M&A the right move for expansion? Before considering acquisition, review all aspects of your company operations, from core competencies to business culture to ability to risk tolerance. Evaluate if a total acquisition is right for you or if licensing a platform, service, or rebranding an existing product is a better way to go. The C-suite needs to honestly assess how prepared they are to acquire an entire company with an existing workforce and a separate culture. Even if the acquisition is intended to operate as a stand-alone, having shared sensibilities on business ethics, timelines, operational matters and customer service priorities will be critical to your ultimate success.
  • Will the acquired company be as valuable tomorrow? Just being a telecom or technology platform isn’t enough anymore. With communication changes happening at light speed, it is essential to closely evaluate how relevant and marketable the potential offerings actually are. Are they a finite service or product with limited scalability, enhancements and add-ons, or has their R&D been prepared for advances and shifts in the cloud, compliance, and customer trends? Today’s cutting edge is tomorrow’s obsolete. Be very sure that the company you are considering acquiring has ideas and concepts in its pipeline that you believe are viable and sustainable for the future. This will not only influence your decision to move forward, it will also impact the offer you ultimately make.
  • Who should be on your team?  No matter your level of telecom industry experience—you can’t do this alone. Acquisitions are a collaborative effort and require the expertise of experts who specialize in M&A and understand what to look for, ask, and anticipate. Your in-house legal and accounting teams may be steeped in your current telecom focus, but they probably do not have extensive experience in bringing two companies together. It is imperative to assemble a team to guide you through current and anticipated aspects of the deal, including scale, government compliance (state by state & worldwide), consumer trends, distribution needs, global logistics, tax structures, patent law, and more.

The telecom industry has always been vitally important, but it has taken on a whole new role, relevance and value in our post-COVID world. For any business growth initiative to be successful, it must be done with precision in purpose and attentiveness in approach and process. By asking (and answering) these four questions, your telecom expansion experience will be free of static, thanks to a good connection.

By David Braun, Founder and CEO of Capstone Strategic

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